COLUMBAN COLLEGE, INC.

College of Business and Accountancy

Bachelor of Science in Accountancy
Olongapo City

RCBC Involvement in Money Laundering Case

CASE ANALYSIS

Group 3

Marjason Tiania

Eunice Anne Salazar

Sheena Marie Tamayo

Al Jean E. Toledo

GAP ANALYSIS

Collusion of the bank’s DESIRED STATE

ACTUAL STATE staff, especially the
Effective internal control
executives.
and strength of risk
Lack of internal control and
GAP management and
falsification of commercial
documents and violating information technology
bank policy. system.
 COLUMBAN COLLEGE, INC.
College of Business and Accountancy
Bachelor of Science in Accountancy
Olongapo City

GAP Analysis- Statement of the Problem

Employee collusion is posing threats to organizations because it involves larger damages

and is more difficult to detect. When organizations segregate functions between roles to lower the

opportunities for employees to commit fraud, employees can work together to bypass these

restrictions.

ISHIKAWA DIAGRAM

CAUSE AND EFFECT

Falsification
Weak Internal of
Negligence of
Control Documents
the bank’s
System staff

RCBC Money
Laundering
Involvement

Violating bank
policies

Manipulation of Abuse of Authority

information
technology system
 COLUMBAN COLLEGE, INC.
College of Business and Accountancy
Bachelor of Science in Accountancy
Olongapo City

Analysis of CAUSE and EFFECT

One of the cause that we can observe with the RCBC’s involvement in a money laundering case from

Bangladesh Bank amounting to $81 million was the weak internal control.

Internal control in accounting includes procedures and policies that increase the reliability of your

financial data and help prevent fraud. They include processes like separating duties and steps,

keeping employees accountable, securing your cash and monitoring financial transactions. In some

cases, you might find that a few employees to whom you've assigned duties have worked together

to commit fraud. For example, you might have one employee enter a transaction into your

accounting system and another confirm the payment or receipt. These two employees could

conspire together to enter and approve a fake supply expense and use the money for themselves.

Management has the ability to perpetrate fraud because it is in a position to directly or indirectly

manipulate the accounting records and prepare fraudulent financial reports. In most cases,

fraudulent financial reporting also involves some management override of controls. Because of the

characteristics of fraud, particularly those involving concealment through collusion (withheld,

misrepresented or falsified documentation) and the ability of management to override or instruct

others to override controls, an auditor may unknowingly rely on fraudulent audit evidence.

Falsifying documents is the act of intentionally changing or modifying information on a document

with the intention of misleading a person or company.

In every institution or company it is very important that the policies of the company is strictly

implemented and the employees are compliant with it. If thee employees will not abide the rule
 COLUMBAN COLLEGE, INC.
College of Business and Accountancy
Bachelor of Science in Accountancy
Olongapo City

there will be a problem in the company. There are certain rules in an institution that must be

complied with. When one of the company’s staff or employee did not follow the rule there will

surely be a problem within the organization. Violations often result from management’s

unfamiliarity with, or misinterpretation of, governing statutes or regulations. Negligence and willful

noncompliance may also lead to violations.

Neglect of duty is the omission to perform a duty. Neglect of duty has reference to the neglect or

failure on the part of a public officer to do and perform some duty or duties laid on him as such by

virtue of his office or which is required of him by law.

Sometimes personnel may take cybersecurity requirements too lightly, leading to dramatic

consequences for the organizations they work for. The fear of being put at risk from within can be

seen clearly in the fact that for businesses, the top three cybersecurity fears are all related to human

factors and employee behavior. Careless or uninformed staff, for example, are the second most

likely cause of a serious security breach, second only to malware. It is important to have the right

policies and procedures in place, but awareness of protocols is not enough. In order to really

combat the risks of a security breach in your organization, you have to go beyond awareness to

really impacting conscious behaviour. This year needs to be the year of working towards a security

culture. Weak information security means there is a significant lack of controls that would

otherwise protect the confidentiality, integrity, and availability of information assets. This could be

anything from a lack of antivirus software to a missing firewall rule to the lack of a proper off-

boarding policy, or a combination of these and/or many other issues. One school of thought is that

we all have weak information security since there could be an infinite number of security controls.
 COLUMBAN COLLEGE, INC.
College of Business and Accountancy
Bachelor of Science in Accountancy
Olongapo City

Manipulation, falsification or alteration of accounting records or supporting documents from which

financial statements are prepared. Misrepresentation in, or intentional omission from, the financial

statements of events, transactions, or other significant information.3.Intentional misapplication of

accounting principles relating to amounts, classification, manner of presentation, or disclosure.

The abuse and misuse of power or authority in the course of performing work can occur both with

external stakeholders and internally among staff. The abuse of authority by the higher officers of an

organization can lead to a fraud. For example they allow fraudulent activities to happen within the

bank. The persons involved in this are those who are given the higher authority (e.g. bank

managers, president.

Alternative Courses of Action

Alternative Courses of Action Effective Easy to Cost Minimal Total

Implement Effeccient Risk

1. Implement Proper 8 9 8 9 34
Security Control

2. Strengthen Internal 9 8 8 8 33
Control
3. Thorough confirmation of 8 9 6 7 30

the client’s information

and identity

4. Disclosure 7 7 5 9 28
 COLUMBAN COLLEGE, INC.
College of Business and Accountancy
Bachelor of Science in Accountancy
Olongapo City

5. Terminate 7 7 6 7 27

ALTERNATIVE SOLUTION *( Identifying people involved in the solution)

Implement proper security control-. To safeguards or countermeasures to avoid, detect,

counteract or minimize security risks. To have limited operators and other authorized employee.

To take action on strengthening the account opening process. All in-branch account opening will be

signed by two officers, each reporting to different units of the bank. Photos will be taken of walk-in

clients who are opening account The Yuchengco-led lender noted that unusual transactions will be

escalated to the regional and/or national higher level officers for independent verification. All

know-your-customer procedures are also being reviewed or further strengthening

Strengthen internal control - it is design on how to prevent or detect material misstatement in the

financial statement. Significantly lowered the thresholds for remittances, required more posting

reviews during the day, and strengthened the process for escalation and reporting of unusual

transaction. Strengthen internal control involves the board of director and the management.

Thorough confirmation of the client’s information and identity- It is very important to confirm

the existence of the clients upon creation of accounts by requiring their appearance, and double

checking their personal information, and documents like identification card and etc.

Terminate – Employees should be terminated when they breach in policies and regulations of the

bank. Violating the bank procedures in falsification of commercial documents causing the bank gets

involved in money laundering.

 COLUMBAN COLLEGE, INC.
College of Business and Accountancy
Bachelor of Science in Accountancy
Olongapo City

Disclosure - is the act of revealing a fact. In financial statements information disclosure is usually

provided in footnote as attachment. Disclosure explains financial position and operating result of an

institution that requires management to report all relevant information about company’s

operations to creditors and investors in the financial statement.

Gantt Chart

IMPLEMENTATION Start Date End Date Duration

1.Monitoring 3/1/2016 3/30/2016 29

2.Control activities 4/5/2016 4/20/2016 15

3.Communication 5/10/2016 5/25/2016 15

4.Control environment 6/2/2016 6/21/2016 19

5. Recommend 7/8/2016 7/30/2016 22

3/1/2016 4/20/2016 6/9/2016 7/29/2016

1.Monitoring

2.Control activities
Start Date

3.Communication Duration

4.Control environment

5. Recommend